April 29, 1998: Park DuValle project spending questioned

Oversight is weak in several areas, HUD review says

Aug. 13, 2009

Written by

Karen Merk

The Courier-Journal

The city of Louisville may have spent too much on lawyers, consultants and other costs in its much-heralded $180 million effort to revitalize the Park DuValle neighborhood, a federal review has found.

The review noted that 39 percent of the Housing Authority of Louisville's $146,000 average cost per housing unit will go toward administrative costs.

The report by the Kentucky office of the U.S. Department of Housing and Urban Development also said:

• More than $1.12 million has been paid to three law firms from the start of the project about three years ago through Jan. 22, 1998. The review called that "a remarkable amount."• A total of 13 other consultants had been paid about $2.3 million as of January.• Procedures for awarding contracts weren't always followed, sometimes resulting in additional expense.• Contractor expenditures weren't always adequately reviewed. One consultant, for example, billed and was paid for 10 hours' work - plus $206 air fare and a $33 cab ride - for delivering the proposal that landed him his contract. The housing authority's executive director, Andrea Duncan, called the payment an oversight and said the money was repaid.

The review was given to the housing authority March 31; a copy was obtained this week by The CourierJournal.

The Park DuValle rehabilitation has entailed leveling the Cotter and Lang Homes public housing and replacing it with a mixed-income neighborhood offering educational and community amenities designed to draw middle-income people back to the inner city.

Art Wasson, HUD's director of public housing in Kentucky, said in an interview: "We were just concerned about some of the costs - and the lack of control over them. . . . Quite frankly, we feel that they need to pay more attention to the particulars. That's the bottom line."

Duncan and the project's manager, Tim Barry, said they would issue a formal response next week. But they said some criticisms in the review are inaccurate.

Duncan and Barry, a top aide to Louisville Mayor Jerry Abramson, said in an interview that the project is so innovative that high-priced, specialized expertise is necessary.

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"This is brand-spanking-new," Barry said. "There's no road map." The Park DuValle project is mixing various sources of money - private investment, public money from HUD and the city of Louisville, as well as federal tax credits.

Duncan said the officials responsible are trying hard to ensure that everything is done correctly.

Duncan also noted that the project involves far more than just putting up new housing. "We're trying to bring back a neighborhood that was totally disenfranchised and disinvested for decades," she said. "We're trying to build quality here."

She said one of the report's key recommendations - limiting legal expenses by using in-house counsel - probably couldn't be implemented. She said it wouldn't be feasible to find staff lawyers with the kind of expertise needed for such a project, when they might be needed for only a few months at a stretch.

Wasson said administrative costs vary by project, and he acknowledged that much of the development cost per unit in the Park Duvalle project stems from such work as demolition of the asbestos- and leadpaint-ridden Cotter and Lang Homes as well as neighborhood improvements.

Still, the report questions the management of some contracts. It says invoices were "signed off" on by Duncan and her director of planning and development, Mike Godfrey, but apparently not reviewed for compliance. "Many of the examples given may appear to be small in terms of dollar amounts," the report said. "However, lack of review procedures leave open the possibility that funds involved could be substantial."

The HUD report said, for example, that Innovative Housing Institute overbilled for the services of one of its consultants for six months, and a public-relations consultant, who had "indicated a willingness to provide a service for $75 an hour," was instead paid at a $100-per-hour rate in her contract.

Duncan said HUD officials didn't understand that some of the contracts were handled by other officials in city government.

Duncan and Barry said that while mistakes may have been overlooked, contracts have undergone substantial oversight.

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They said they've already corrected a practice the report said "appears costly" - using contractors as chairmen of advisory committees. The review cited a $700 invoice and two $1,000 invoices from the Louisville law firm of Stites & Harbison for meetings led by lawyer Fred Joseph.

HUD also said having consultants as chairmen of committees could appear to pose a conflict of interest, because the panel's recommendations "could be self-serving in terms of billable hours."

Duncan and Barry said that no such conflicts occurred, but that two consultants who served as chairmen - Joseph and public-relations consultant Vikki Stone - were bumped down to committee members.

The review said the city should try to limit the use of consultants' time.

The report includes a letter from an out-of-state developer who said she was paid $3,700 for a two-day trip to Louisville for what was planned to be three meetings, but actually entailed one 15-minute presentation.

The developer, who worked on the first phase of the project, asked the housing authority to "take a look at the use of my firm's time."

Duncan said that the developer raised the issue after the project's management committee questioned her use of her time, in an attempt to contain costs.

The HUD report said Stites was paid $315,065 though Jan. 22. The other legal fees were paid to the outof-state firms of Wolf Block Schorr ($677,135) and Reno/Cavanaugh ($173,874).